We propose the unified approach to construct the non–informative prior for time–series econometric models that are invariant under some group of transformations. We show that this invariance property characterizes some of the most popular models hence the applicability of the proposed...

This paper presents an information-theoretic model of IPO pricing in the presence of adverse selection and multiple trading periods. Initially investors produce information to reduce the information asymmetry and are compensated by the owner-manager. Some new investors enter and all investors...

We evaluate predictive regressions that explicitly consider the time-variation of coefficients in a comprehensive Bayesian framework. This allows for fast and consistent adjustment of regression coefficients to changes in the underlying economic relationships. For monthly returns of the Samp;P...

This paper develops a microstructure model which describes the way in which private information is incorporated into financial market prices via a Bayesian learning process used by agents. The paper shows how a latent process which represents information arrival can be inferred from observed...

The problem in default probability estimation for low-default portfolios is that there is little relevant historical data information. No amount of data processing can fix this problem. More information is required. Incorporating expert opinion formally is an attractive option

This paper presents new evidence on the role of macroeconomic and institutional factors in equity market development and on the sources of equity market growth. Using panel data on 33 countries, I find that development of financial intermediaries and trade openness are positively associated with...

The systematic risk of IPO's in the thinly traded Istanbul Stock Exchange (ISE) are estimated using Empirical Bayes Estimators (EBE). The sectors that the firms belong to, provide the priors. Comparisons are made with OLS estimators across different estimation and forecasting periods. Two...

One striking feature of international portfolio investment is the extent to which equity portfolios are concentrated in the domestic equity market of the investor - the home bias puzzle. In this paper, I examine the role of investors' perception of the risk of foreign investment on their...

We apply Bayesian methods to study a common VAR-based approach for decomposing the variance of excess stock returns into components reflecting news about future excess stock returns, future real interest rates, and future dividends. We develop a new prior elicitation strategy which involves...